Lone Star Energy: Why Texas Will Resist the Call for a Unified Grid

A recent proposal to link the eastern, western and Texas grids together to create a national, alt-energy-friendly supergrid has sparked the interest of utilities and energy insiders, such as former energy secretary Bill Richardson. Can a high-tech substation in New Mexico create a smarter, unified grid? Not if Texas doesn't cooperate.

At first glance, a recent proposal to link the lower 48's three electrical grids--the Eastern, Western and Texas Interconnects--seems like a no-brainer (technological hurdles excepted). The Tres Amigas "superstation" proposed for Clovis, N.M., would extend the reach of renewable energy, finally allowing wind power from Kansas to flow to Colorado, or solar power from Arizona to reach Oklahoma. It would also let wind and solar energy from the blustery, blistering hot plains of West Texas flow across state lines. That is, if Texas buys into it--and given a long, profitable history of keeping energy in-state, they have a lot of reasons not to.

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Texans appreciate their independence. That's an axiom I heard repeated again and again while traveling across the state for PM's December feature on Texas and renewable energy. They also keep their eye on the bottom line and anything that gives them a competitive business advantage. That includes 10 miles of offshore wind rights--a remnant of Texas's era as a sovereign republic--and an intrastate grid. "Texas is different than the nation for a lot of reasons, historical and functional," Michael Webber, an assistant professor of mechanical engineering at the University of Texas at Austin, told me. "We have our own grid; that's very important. That means we can do things differently than other states."

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Since roughly 1935, the majority of Texas utilities have opted to isolate themselves from interstate connection and thus from federal regulation over rates, terms and conditions of electrical transmission. Managed by the Electric Reliability Council of Texas (ERCOT), they now provide more than 85 percent of the state's electrical load, covering 75 percent of its land area. For utilities, that makes energy a straightforward market to do business in, and it allows them to be more nimble and innovative with new energy sources. It also vastly expedites the process for renewable energy developers that want to plug in to state transmission lines.

"If you go to either of the other two grids you've got to get 20-something state utility commissions to agree on something," B.J. Stanbery, the founder of the Austin-based solar manufacturer HelioVolt, says. "In Texas, we've only got one to persuade. Now, that's a big benefit." As a result, Texas has, in very short order, erected enough wind turbines to become the national leader in wind-energy production--by a wide margin. If it were a country, Texas would rank sixth in wind power. With a semiconductor industry already based in Austin, Texas could do the same with solar, according to community leader Brewster McCracken. "The fact that we have a major technology center and we're not on the federal grid means that if we decide to lead, we're well positioned to lead," he says.

Companies such as Microsoft, GE, Oracle, GridPoint and Intel saw the lack of federal red tape as an advantage, too, which is why they invested time and money in an alt-energy think tank in the state capital. Launched in December, the Pecan Street Project is a nonprofit effort to turn Austin into a laboratory for smart-grid technology. "As we develop Pecan Street and some other things, we feel like we're going to be able to have a great deal of flexibility in what technologies we can apply to the grid, how we can locate them and the willingness to support their application," says John Baker, Austin Energy's chief strategy officer. That's great news for companies who want to test out smart-grid software in a real-world setting; it could also help Texas's utilities quickly arrive at a lucrative business model for distributed energy.

Of course, the Federal Energy Regulatory Commission could choose to waive jurisdiction over power sales in Texas if the state joins the national grid. Some wind developers out in West Texas would be pleased to have another market for their power. Texas now generates about 8500 megawatts of wind energy (three times as much as California) and has completely maxed out the existing transmission capacity. But by the time a new connection to the proposed superstation is built--or possibly even approved--$5 billion worth of new transmission lines will be ready to carry electricity from Texas's most remote areas to its urban centers. These lines will increase the system's transfer capability to 18,000 kilowatts--plus, two more private lines are already being built.

Texas is now a net importer of energy, and its industries have a particularly voracious appetite for electricity--the state consumes more power than any other. So there's a huge price-sensitive market located comfortably within its own border. Until recently, Texas's consumers also enjoyed electrical rates that were among the lowest in the nation. Then the price of natural gas spiked and fuel-free electricity began to look mighty appealing. "People that use a lot of electricity are smart to hedge their costs, and I think there's a lot of smart businessmen in Texas," Stanbery told me. So right now, Texas has a lot of incentive to remain, if not a sovereign republic, every bit as independent.